7 Reasons Nonprofits Flounder or Fail

A group of our friends led a wonderful start-up that was trying to bring new perspectives to the environmental cause and reach faith-based constituencies who were not traditional supporters of these concerns. They had the plan worked out on paper, and even had a foundation to underwrite the effort for a couple of years. But although there were many who cheered from the sidelines, very few people were committed enough to provide significant financial support. When the grant money ran out, the charity all but disappeared.
This story is all too common. Here’s why.

Empty Optimism

We’ve seen some of the best, most needed (in our view), and earnest efforts falter and fail because the leaders simply did not accurately calculate the amount of support that would be available and the alliances and partnerships that would buttress their humble beginnings. The first reason nonprofit flounder or fail is that the vision and the value proposition simply don’t “sell,” and the founders or investors didn’t have the tools or didn’t take the time to measure this before they poured time and treasure into a passionate desire that was not to be.

Values Vacuum

Healthy organizations establish core values that guide the way leaders and staff do business, and how they deal with each other and with outside people and groups at every point of contact. We have found that it is far too common for autocratic and self-focused founders to establish one core value: “do as I say.” These nonprofit heads find it very difficult to transfer authority or to share the limelight and leadership with an empowered team. There is little internal trust, and insufficient values to guard against abuses of power, privilege, and people. It is also an environment in which many unethical and even illegal practices can flourish, and often do. These organizations frequently fail in the first generation, and almost never thrive when the leader with all of the chips finally cashes them in.

Competitive Blinders

Nonprofit leaders and ministry executives are frequently insular and blind to the external changes and “market” forces that will be their undoing. Often it’s because they are so focused on the needs and crises around them. Or they cannot imagine anyone or anything that would deter them from their righteous ends. And charities are often unfamiliar with, or even repelled by, the notion of “competitors,” so they don’t recognize true rivals or adjust to compete. There is no ability to adjust programs to match changing situations, culture, or competition and to compete for donations, volunteers, media coverage, or program space.

Iced Innovation

The emergence of the Internet and subsequent online innovations that have changed the world in many ways has made strikingly obvious a business truth that is actually timeless. If you do not innovate, you will disappear. If there is no adjustment of creative content, communications, or methods for new times and trends you will miss opportunities, and be judged as antiquated (and perhaps irrelevant). Creative presentation and original thinking buy you another look, enable you to capture attention in a crowded field, and present new ways for people to engage with your mission.

Mission Creep

When a corporation goes beyond its initial product line and area of service, it’s called brand extension. In nonprofits, we call it mission creep, and because charities are in the business of changing the world, their leaders often cannot seem to stop themselves from seeing every need as a call. The result is too many directions, no mission clarity, diffused expertise, and donor confusion.

Lone Ranger

We have worked frequently with charities that have almost no real relationships. One organization that comes to mind is the leader in its aid category, raising millions of dollars through television acquisition and direct mail. Although they rely on active churchgoers for their support, they have almost no relationships with church leaders, local churches, or other religious bodies. In the last 15 years, they haven’t pursued any meaningful community contact. All of their energy goes into completing donor transactions. Although this is an extreme example, the tendency is rampant. As we’ve explained earlier, when organizations do not have authentic relationships, they are vulnerable to economic downturns.

Data Dearth

Although many organizations have begun measuring every possible statistic related to fundraising efforts, few have enough data to guide planning, analyze management systems, or redirect underperforming programs or communications. This may be because of the pressure to reduce overhead, or because the entrepreneurial spirit of charity leaders causes them to fly by the seat of their pants, to trust their own (often prescient) instincts.